The package of legislative proposals
This proposed AML/CFT Package included four pieces of draft legislation
which consist of:
- The EU “single rulebook” Regulation ( “AMLR” ): contains provisions on conducting customer due diligence ( “CDD”), transparency of beneficial owners, and the use of anonymous instruments, such as crypto-assets. According to the EU Commission, the replacement of certain rules in a Directive with more harmonised and directly applicable rules in a Regulation will remove the need for transposition work in the EU Member States and facilitate doing business for cross-border entities in the EU.
- The 6th Anti-Money Laundering – Directive (“AMLD6”): contains provisions that will be transposed into national law, such as rules on national supervisors and financial intelligence units in Member States. AMLD6, together with AMLR, will replace AMLD4.
- The Regulation establishing the European Anti-Money Laundering Authority (“AMLA Regulation”) contains provisions for creating a new EU financial authority. The AMLA will have direct supervision powers and the ability to crack down on illicit finance across all EU Member states. Furthermore, AMLA will be able to impose fines and penalties upon any subject person who fails to comply with the AMLR.
- Amendment of the EU Transfer of Funds regulation on the information accompanying the transfers of funds and certain crypto-assets, in order to make it possible to trace respective transfers. (For more info the Travel rule compare here).
Provisional agreement for AMLA
AMLA will have direct and indirect supervisory powers over high-risk obliged entities in the financial sector.
According to the provisional agreement reached, AMLA is supposed to develop an integrated mechanism with national supervisors to ensure obliged entities comply with AML/CFT-related obligations in the financial sector. AMLA will also have a supporting role concerning non-financial sectors, and coordinate financial intelligence units in member states.
The provisional agreement adds powers to AMLA to directly supervise certain types of credit and financial institutions, including crypto asset service providers if they are considered high-risk or operate across borders.
AMLA will select credit and financial institutions that represent a high risk in several member states. The selected obliged entities will be supervised by joint supervisory teams led by AMLA that will carry out assessments and inspections. The agreement entrusts the authority to supervise up to 40 groups and entities in the first selection process.
AMLA will have a general board composed of representatives of supervisors and Financial Intelligence Units from all member states, and an executive board, that would be the governing body of the AMLA, composed of the chair of the Authority and five independent full-time members.
In addition to supervisory powers and in order to ensure compliance, in cases of serious, systematic or repeated breaches of directly applicable requirements, the Authority will impose pecuniary sanctions on the selected obliged entities.
Provisional agreement for AMLR and AMLD6
On 18 January 2024, the EU Council and the EU Parliament reached a provisional agreement on the new regulation (“AMLR”) on AML/CFT that will harmonise rules for all obliged entities; and on the 6th Money Laundering Directive (“AMLD6”).
Key provisions of the provisional agreement include:.
Extended list of Obliged entities
The list of entities mandated to comply with AML regulations is broadened significantly:
- Crypto-Asset Service Providers (CASPs) – as defined in MiCAR must conduct Know Your Customer (KYC) checks for transactions exceeding EUR 1,000 and adopt risk mitigation strategies, particularly for dealings involving self-hosted wallets.
- Traders in luxury items such as precious metals, stones, high-end vehicles, and artwork are now subject to AML obligations. Conversely, traders dealing in other commodities are relieved from KYC mandates.
- Professional football clubs and agents are designated as obliged entities, although member states can exempt those deemed low-risk.
Cash payment limits
To hinder money laundering, a cap of EUR 10,000 is established for B2B (Business to Business) and B2C (Business to Consumer) cash transactions throughout the EU, with member states retaining the discretion to impose stricter limits. Personal cash transactions (C2C) will continue to have no cash payment caps. Obliged entities must also identify and verify a person who carries out an occasional transaction in cash between €3,000 and €10,000.
Beneficial ownership Transparency
The harmonized definition of beneficial ownership is refined to encompass ownership and control, prescribing a thorough examination of each. The ownership threshold remains at 25%. Further clarifications are provided for complex ownership and control structures, data protection, and document retention. Additionally, foreign entities owning real estate must retrospectively register in the transparency register by January 1, 2014.
Enhanced Due Diligence measures
Enhanced due diligence is mandated for cross-border correspondent relations involving crypto-asset services. Furthermore, financial institutions must implement enhanced due diligence measures in transactions with individuals of high net worth and significant asset values and involving high-risk third countries.
The texts will now be finalized and submitted to member states’ representatives for approval before they formally enter into force.
The comprehensive overhaul of the EU’s AML framework is supposed to establish a robust commitment to combating money laundering and terrorist financing, aligning regulations across member states, and enhancing the overall transparency and security of financial transactions within the EU.